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Sumit Sharma

The author is Co-founder of GoBOLT, one of the tech-logistics companies based out of New Delhi. He can be reached at

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Post Budget Analysis of the Logistics Sector

Overall, the Union Budget was expected to resolve pending issues in the sector, simplify tax procedures and rationalize the overall tax regime, and drive growth in the sector

The 2016–17 Union Budget laid an emphasis on infrastructure growth with plans to develop highways, railways and rural roads, and revive unused airstrips and airports. The proposed projects were completed successfully. They ensured cost effectiveness and were efficient in operating the transport and logistics sector. It was expected that the government might take initiatives to resolve pending issues on Goods and Services Tax (GST), land acquisition, environmental clearances, development of digitalization, etc., which could help reduce the delays in the transport and logistics infrastructure development.

The Budget was also expected to include incentives and schemes to increase private sector participation in the transport and logistics sector. Overall, the Union Budget was expected to resolve pending issues in the sector, simplify tax procedures and rationalize the overall tax regime, and drive growth in the sector

The Union Budget 2017-18 laid focus on infrastructure development as one of the key themes, including the following proposals around the transport and logistics sector.

Roads and rail

• The government allocated INR 64,900 crore towards the development of national highways
• The Budget announced a sum of INR 27,000 crore to the Pradhan Mantri Gram Sadak Yojna (PMGSY), of which INR 19,000 crore would be contributed by the central government and the rest would come from the state governments. The pace of construction of rural roads has increased to 130 km per day from 73 km per day in 2016–17
• Including the capital expenditure for the railways, the total outlay on roads and rails would be INR 2.22 lakh crore for 2016‒17. The total outlay for transport sector would be INR 2.41 lakh crore
• The railways shall also take measures to increase competitiveness and regain modal share: — The railways is to implement end-to-end integrated commodity transport solutions for cargo customers through partnership with logistics players — Rolling stocks and practices to be customised to transport perishable goods, especially the agricultural products (Source: KPMG 2017 Report)

Introduction of specific programmes for the developing multi-modal logistics parks and multi-modal transport facilities have been planned by the government. Institutionalizing a dispute resolution framework for the projects of infrastructure under the PPP model and public utility contracts have also been planned by the government.

Direct tax
No reduction in the corporate tax rate. However, Micro, Small and Medium Enterprises (MSMEs) (with turnover for FY 2015-16 not exceeding INR 50 crores) entitled to reduced rate of 25 per cent

Indirect tax
The Finance Minister re-affirmed the commitment to implement GST and highlighted the progress provisions relating to filing of advance ruling under Customs, Excise and Service Tax re-aligned with Income Tax.
Advance ruling machinery merged with Income Tax and time limit for pronouncement extended from 90 days to six months

The total transport infrastructure outlay has increased by about 10 per cent to INR 2.4 lakh crore. It represented continuity in its advancement. Benefit realization could be maximized if the proposed outlay would have been utilized.

The current Union Budget has a clear focus on developing highways, railways and rural road infrastructure. The fund allocation for railways and initiatives to improve customer safety are expected to help them improve competitiveness thereby regaining modal share and propelling the transport, warehousing and logistics businesses rapidly over the medium term.

Overall the Budget was committed to provide a stable and predictable taxation regime, reducing litigation and thereby boosting up the sector. The sector expects more clarity on various direct tax issues for regular and occasional shipping business. The expectations of the sector with regard to tax incentives would also need to be clarified in the near future.

Future Headway
Recognition of the Budget has been made for emphasizing on infrastructure and focusing on the available initiatives of the government. Some of the recommendations are given below:

1. Improvement for the need of the modal mix for diverting the transportation of bulk commodities from road to increase appropriate modes, such as rail and waterways, thereby giving it a free up capacity for fast moving goods is required.

2. Requirement for the provision of clarity on the present issues concerned about the inter-state goods transport, bonded warehouses apart from other issues to reduce prosecution and provision of a boost to the sector.

3. With increased emphasis on digitization and transparency in the economy, the government shall be required to take measures to provide a thrust to the interoperable Electronic Toll Collection system (ETC) for toll roads to ensure seamless movement of traffic and reduction of toll revenue leakages.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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Post Budget Analysis Logistics Sector

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